ETS ALLOCATION in KOREA

Transcription

1 Experience with Emission Benchmarks ETS ALLOCATION in KOREA 1 st October 2015 ECO&PARTNERS Dae-Woong Lim 0

2 Contents 1. National GHG Reduction Target 2. K-ETS: Implementation Phase, Emission Caps by Sectors 3. K-ETS Allocation: Allocation Method by Phase, Benchmarking during Phase I, Further Allocation Plan 4. Major Obstacles to Apply Benchmarking Allocation 1

3 1. National GHG Reduction Target The Korean government has announced it will reduce greenhouse gas emission by 30 percent(543mtco 2e ) from the business-as-usual(bau, 776 MtCO 2e ) for 2020 The strategy is underpinned by the Framework Act on Low Carbon, Green Growth, passed by Korea s National Assembly in 2010 The government submitted its INDC to the UNFCCC, putting forward a post 2020 climate target to reduce is greenhouse gas emission by 37%(536 MtCO 2e ) below BAU emissions of 851 MtCO 2e by 2030 According to the Ministry of Environment, reduction of 11.3% will be achieved by IMM (international Market Mechanism) (unit: MtCO 2e ) % % 11.3% achieved by IMM BAU 2030 BAU 2

4 2. K-ETS: Implementation Phase In January 2015 an emission trading scheme(ets) was launched in accordance with ACT ON THE ALLOCATION AND TRADING OF GREENHOUSE-GAS EMISSION PERMITS (2012) which is based on Framework Act on Low Carbon, Green Growth In its first phase ( ), the Korea ETS will rely on free allocated credits only, with auctions being introduced in increasing increments in the second ( ) and third phases ( ) Implementation Phase Phase I (2015~2017, 3years) Phase II (2018~2020, 3years) Phase III (2021~2025, 5years) Set ETS Flexible Operation Accumulate infrastructure and Experience 100% Free Allocation Absolute Emissions Cap of Considerable Emission Reduction Expand Application Sectors Advance Allocation Method 97% Free Allocation Proactive Emission Reduction Expand Allocation Auctioning Expand Flexibility Set Allocation Method Less Than 90% Free Allocation 1,687 MTCO 2e * The ETS emission cap is larger than national target in accordance with double counting of indirect emission such as power sector. 3

5 2. K-ETS: Emission Caps by Sectors In Phase I of ETS absolute emissions cap is 1,687 MtCO 2e,and will decrease from 573 MtCO 2e in 2015, to 562 MtCO 2e in 2016 and 550 MtCO 2e in 2017 based on 2% reduction rate of each year. Coverage for the ETS will extend to 522 companies from 23 different sectors (5 categories) Threshold: Business entity over 125,000 tco2, business entity with a place of business(site) over 25,000 tco2 Further, About 44% of total emission cap is accounted to power generation & energy sector, followed by steel, chemicals, and cement sectors Emission cap by sector Business entities by sector % 0.2% 5.3% 0.0% 0.1% 0.1% 7.6% % 0.2% 3.3% 0.5% 0.5% 0.5% 0.7% 0.7% % 1.1% 1.3% 18.1% 1.2% 1.6% % 1.6% % * An emergency reserve of 88 MtCO2e may be made available if there is a need for market stabilization Power generation & energy Steel Chemicals / petrochemicals Semi-conductor Display Waste Pulp Non ferrous metals Glass & Ceramics Textiles Automobile Buildings Communication Electrics / electronics Ship building Food Machinery Water supply Timber Mining Oil refineries Cement Aviation Reserve 4

6 3. K-ETS Allocation: Allocation Method by Phase The participating companies will be given 100% of their emissions allowance for free during the scheme s first phase, and 97% during the second phase. From 2021, at least of 10% of allowances will be auctioned Energy-intensive and trade-exposed (EITE) sectors will receive 100% free allocation regardless phases. The EITE sectors are defined along the following criteria: > 30% of carbon intensity ; or > 30% of trade-exposed intensity ; or > 5% of carbon intensity and > 10% of trade exposed intensity Allocation Method by Phase Phase I (2015~2017, 3years) Phase II (2018~2020, 3years) Phase III (2021~2025, 5years) 100% Free Allocation Free Allocation Free Allocation * In according to the ACT ON THE ALLOCATION AND TRADING OF GREENHOUSE-GAS EMISSION PERMITS, the EITE sectors have a possibility to be given 100% free allocation during the second and/or third phase. 3% Auctioning 10% Auctioning or more 5

7 3. K-ETS Allocation: Benchmarking during Phase I (1/3) Most sectors will receive their free allowances based on grandfathering method, and some business will be allocated free allowances following benchmarking method during phase I. The types of business under benchmarking are below: Aviation facility services for domestic private aircraft in aviation sector ; or Combustion facility for gray cement clinker in Cement sector ; or Oil-refined facility include relevant utilities in same installations in Oil-refinery sector Eligibility for benchmarking Considered availability and definitude of boundary, three business are allocated free allowances following benchmarking method. - (Availability) The business entities with reliable data of fuel consumption, product output, and other which is directly related to the calculation for benchmark. - (Definitude) The business entities with handful products in same business area and clear boundary. 6

8 3. K-ETS Allocation: Benchmarking during Phase I (2/3) The starting point for the benchmark during phase I is determined by Weighted Average Efficiency of business entities eligible. The calculation is considered the balance and fairness of all participants include GF applied entities in same sector. (The correction factor will applied to all entities in same sector regardless allocation methods) Benchmark Calculation Benchmark = Total GHG emissions from BM boundary of business entities eligible for Benchmarking Total activity(production) from BM boundary of business entities eligible for Benchmarking 7

9 3. K-ETS Allocation: Benchmarking during Phase I (3/3) The allocation of three types of business are following benchmarking method during first phase. Sector Item Note Aviation Service Cement Oil Refinery Eligibility Benchmark Data Eligibility Benchmark Data Eligibility Benchmark Data Aviation facility services for domestic private aircraft (excluded international airline) Other installations (building, mobile combustion, etc) are applied GF method tonco 2 -eq/ton-km Average emission of aviation facility services for domestic private aircraft during 2011~2013 (per ton-km) Combustion of grey cement clinker (Kiln) Process emissions from grey cement clinker, and other installation (white cement clinker, building, electricity, etc) are applied GF method tonco 2 -eq/ton Annual average of grey cement production in base year of emission statement (ton) Oil-refined facility include relevant utilities in same installations tonco 2 -eq/cwb The sum of annual average of an amount used in base year multiply by CWB* factor * Complexity Weighted Barrel: metric of GHG efficiency for petroleum refineries developed by Solomon Associates 8

10 3. K-ETS Allocation: Further Allocation Plan In accordance with the issues on rewarding early action within a grandfathering approach, the government plans to expand benchmarking approach from second phase The allocation plan should be released before June 2017 according to the law. The list of business entities eligible and benchmark will be determined before the publication of allocation plan The ministry of environment is working on benchmarking allocation but the information yet to be opened to the public. The allocation will be based on product benchmarking, but heat or fuel benchmarking is also considered as a fall-back approach Phase I allocation method GF Phase II allocation method GF Heat/Fuel BM Product BM Product BM 9

11 4. Major Obstacles to Apply Benchmarking Allocation Electricity usage cannot be measured by sub-installations Most of Korea entities are measuring electricity by site. Thus, many entities are having trouble with measuring electricity usage separately by sub-installations. It is inevitable to combine of grandfathering and benchmarking method. The exterior of installation cannot be applied Benchmark Unlike EU ETS is based on installations, Korea ETS is based on the site of business. Thus, the emissions from exterior of installation are exist, and it cannot be applied Benchmarking method. Site EU ETS Site KOREA ETS Exterior of installation Installation Installation Installation Installation Counted emission boundary 10

12 Dae-Woong Lim Principle Partner 15F KGIT Bldg. 402 Worldcupbuk-ro, Mapo-gu, Seoul Tel +82 (0) , +82 (0) , Fax +82 (0) Thank you 감사합니다 We contribute to the realization of global sustainability through our innovative intelligence and cooperative action. Copyright c 2015 ECO&PARTNERS Co., Ltd., All Rights Reserved. 11